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Niu Gensheng recently said to the public: "Mengniu is not at all willing to be bought by foreigners."
 
In the middle of October, Niu Gensheng, board chairman of Mengniu sent a "letter for help" to some Chinese entrepreneurs, which raised hot discussions among the society.
 
On November 3, Mengniu provided a copy of data to China Business News, showing that Laoniu Fund (founded by Niu Gensheng) once mortgaged a part of the shares of Mengniu denoted by Niu Gensheng in Morgan Stanley. This part of shares took 4.5% of the total capital stock of the Mengniu Company listed in Hong Kong stock market. After the fall of Mengniu stock, Laoniu Fund wanted to dissolve the mortgage in Morgan Stanley in the way of loan on mortgage from Legend Holdings and other financial institutions. Its aim was to avoid the passive sale of the mortgaged stock caused by the fluctuation of the stock price.
 
However, this letter was not the "letter for help" mentioned above.
 
The "letter for help" is also called the "ten-thousand-word letter from Niu Gensheng". Its official title was A Letter from Niu Gensheng to Directors of the China Entrepreneur Club and the Classmates in Cheung Kong Graduate School of Business. It mainly told about the measures taken by Mengniu for guaranteeing the food safety, protecting the milk farmers' profits and interests and promoting the stabilization of the dairy market after the melamine event. It also expressed Niu's appreciations for the help of his friends.
 
In the first part of this letter, Niu divided the melamine event into four phases: the subsequent trouble for the Chinese dairy industry, warning alert for the world dairy industry, the involvement of all the dairy products; scandal in other food products.
 
The second part of this letter is about the source of the problematic milk. Niu Gensheng attenuated that the melamine was not added in the processing link in the enterprise. He attributed this event to "the illegal activities of a very few illegal milk suppliers". This meant that Niu thought the melamine event started from the source. Before this, a member of the management in Sanlu also expressed the same idea. However, Niu mentioned a little about the responsibility that the enterprises shall assume. "The biggest liability of the enterprises is that they can not prevent the raw milk with melamine from the illegal milk entering the processing link in the enterprises. There are huge loopholes in our management," Niu wrote in the letter.
 
Niu said: "After the breakout of the event, there were only 10 checking equipments in our 40 more production bases that can detect the melamine. And no reagent for melamine can be found. We had to take 'emergent purchase' but got only 26 sets of equipments after hundreds of phones and visit to dozens of manufacturers. So we had to do emergent purchases worldwide.”
 
According to the letter, in the first week after the breakout of melamine event, Mengniu was in serious lack of checking equipments. They could not put the raw milk without being checked into processing but pour it out. The total amount of raw milk poured out by Mengniu was nearly 30 thousand tonnages, same as the daily output of 1.9 million milk cows. The total loss was 100 million Yuan (USD 14.3 million).
 
It was known that few practitioners in the dairy industry mastered how to improve the nitrogen content in the milk by adding melamine before this event. But the problems of problematic milk haunted the Chinese dairy industry for long. Several years ago, the director of China Milk Association Wang Dingmian began to call for the solutions to problematic milk.
 
Niu didn't mention the impact on the capital chain of Mengniu brought by the melamine event. But we can see it from the help from other enterprises to Mengniu. Chen Gang, a securities analyst in food industry. The melamine event brought great impact on the capital chain of all the Chinese dairy enterprises. Great losses appeared in the fiscal reports of the third quarter of Yili and Bright Dairy.
 
"Some enterprises couldn't withstand the strike of this event and collapsed. So far as I know, some milk plants have been closed," said Wang Dingmian. "The trough of the dairy industry caused by this crisis may last 2 to 3 months. And the recovery period may last till the middle of next year. There should be rebound from the middle of next year. Then the impact of the melamine will gradually fade away. But this will take one or two years."
 
Niu wrote in the letter: "I, with my own experiences and lessons, remind every director and classmate to prevent the similar risks. As for Mengniu, we would rather send it to you brothers free of charge than sell it to foreigners."
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